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For many readers, it is time to sober up, turn off the football, and get back to work on compensation decisions and proxy statements.* Let’s start with everyone’s favorite topic: performance goals. We have discussed certain critical topics relating to performance-based compensation recently, including:

But wait. There’s more. An article in The Wall Street Journal, “‘Adjusted Earnings’ Could Cloud Results,” last month noted that, “Hundreds of U.S. companies are trumpeting adjusted net income, adjusted sales and ‘adjusted EBITDA’,” and “[a]bout a quarter of earning related filings this year included figures that don’t comply with generally accepted accounting principles, or GAAP.”

As most readers will recall, SEC rules do not prohibit using or disclosing financial target levels that are non-GAAP financial measures. However, the company must disclose how it calculated the non-GAAP financial measure from figures used in the company's audited financial statements. Therefore, executive compensation professionals working with one or more of the “hundreds of U.S. companies” using these figures probably should brush up on the SEC’s Non-GAAP Guidance in Reg S-K, C&DI 118.08 and 118.09, before proxy statement drafting.

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